I’m optimistic about a pick-up in industrial growth

Our asset quality has improved this year. The NPA level will come down this year as recoveries from sticky loans have improved tremendously in the current year. The marginal deterioration in asset quality last year was due to serious liquidity problems faced by units in certain industry segments on account of sluggish industrial conditions. We have made full provisions/write-off in respect of all NPAs as per RBI norms.

n Projects of many companies which raised money in the 1994-96 period are now stalled or abandoned. How is IDBI tackling this problem?

It’s not true that projects financed by us have been stalled. Due to liquidity crunch many projects faced problems. We’ve helped many companies to tide over these problems by adjusting the debt-equity ratios to suitable levels. Implementation of projects which had slowed down has picked up of late. I’m optimistic about a pick-up in industrial growth.

* How is IDBI’s sanctions and disbursements faring in the current year? What’s the progress in financing infrastructure progress?

We’ve already registered a 5.3 per cent growth in its disbursements at Rs 6,245 crore (Rs 5,930 crore) in the first half while sanctions went up by 39 per cent at at Rs 10,933 crore (Rs 7,868 crore). But IDBI’s refinance has come down as banks are not taking up money set apart for this purpose. We’ll exceed the 20 per cent growth target set for sanctions in the full year. Our net profit also went up by 34 per cent to Rs 689 crore in the first half. We’re financing infrastructure projects in a big way — almost 40 per cent of the finance has gone to core sector projects.

* Despite the good performance, IDBI scrip has not picked up on the stock exchange. Any comments?

We’ve been consistently bettering our performance in the last six years. Take profits, sanctions or disbursements… all have been going up year after year. However, it’s true that this is not reflected in the share price of IDBI. Strangely, it is still quoting below the book value of around Rs 117 (whereas the market price of the share is around Rs 90). The scrip has tremendous potential and the market has not realised it. The return on assets of IDBI is 2.64. This is much higher than the rate for the banking sector which is below one per cent.

* How you do you look at interest rates scenario in the country? Will it go down or remain at this level?

The interest rates in the country have already fallen significantly as a result of RBI measures like reduction in cash reserve ratio. Considering the inflation rate of 3.50-4 per cent, I feel the current interest rate is at the level it should be. One will have to look at the returns of investors in fixed deposits and debt instruments. If you consider the growth in our sanctions and disbursements, it’s clear that credit offtake is picking up. The primary market is also expected to pick up… the success of bank issues is an indication.

* How is the system of corporate governance in India? Is IDBI taking any initiative on this front?

Looking at the set-up in many family-run companies in India, it is necessary that they should professionalise their companies. We’ve decided to remove our nominee-directors from companies with loans below Rs 50 crore. We’ve already sent guidelines to our nominee-directors which will make them more active in their respective boards. In IDBI, we’ve restructured our functioning as per the recommendations of Booze, Allen and Hamilton. We’ve formed credit appraisal committees at the zonal levels, giving them powers to sanction loans upto Rs 15 crore. Loans upto Rs 50 crore will be handled by the credit panel at the head office and above Rs 50 crore will be sanctioned by the board. The basket of subsidiaries — IDBI Bank, mutual fund, credit rating agency and stock-broking firm — will retain the existing structure.

* The wall separating banks and financial institutions is being slowly dismantled. How do you look at competition from banks?

Even though banks are allowed in term loan financing, banks will not be a threat for financial institutions. Banks cannot afford to lock up funds on a long-term basis. I feel the existing structure of banks giving short-term funds like working capital funds will continue. FIs have started taking fixed deposits (FD). We collected Rs 487 crore as FD this year. FIs are also now giving short-term funds. n What is your fund requirement in the current year? What is the total mobilisation so far?

We had already mobilised Rs 6,700 crore in the first half of the year. We have plans to raise another Rs 6,000 crore through private placement of Omni bonds, public issue of bonds, FDs and other methods.